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Business Home > Nation
 
GCC hotel revenue poised to hit $25 billion by 2016

Issac John / 19 July 2013

Hotel revenue in the GCC is expected to soar to $25 billion by 2016 from $17.83 billion in 2011, driven by a projected surge in international tourist arrivals.

At a compound annual growth rate of 6.93 per cent, the revenue jump reflects the region’s steadily improving business prospects as well as leisure tourist demand, Kuwait Financial Centre, or Markaz, said in its GCC Hospitality report.

The average occupancy rate for GCC, which  was 68 per cent for the year 2012, is expected to reach an average occupancy of 73 per cent by 2016, said the report.

“The GCC is home to high percentage of luxury hotels and its pipeline is also dominated by many high profile projects,” it said.

STR Global in its Construction Pipeline Report for June 2013 said that the Middle East/Africa hotel development pipeline comprises of 491 hotels totalling 120,795 rooms.

Dubai, region’s key market reported the largest number of rooms under construction with 10,391 rooms. Five other markets reported more than 1,000 rooms under construction: Riyadh, Saudi Arabia (5,598 rooms); Abu Dhabi, United Arab Emirates (3,727 rooms); Jeddah, Saudi Arabia (2,213 rooms); Cairo, Egypt (1,744 rooms); and Amman, Jordan (1,547 rooms).

Markaz report said the Average Daily Rent (ADR) for the year 2012 is estimated at $204, which is relatively on the higher side in comparison with other regions. “While issues like political unrest and oversupply affected the OR and ADR in the past, the forecast for both these metrics is positive with increasing business as well as leisure tourist demand.”

The report argued that although there were several growth factors driving the hospitality industry in the GCC,  international tourism has to be the most significant one.

“The GCC region is home to some of the finest hotels in the world and people visit the region for niche tourism offerings such as cultural, religious tourism as well as sports and event based tourism. The region is increasingly seen as a Mice destination.

“The improving economic condition, government’s support to the private sector, the strategic location of the GCC as an ideal transit point along with the better reach from the airline industry fosters well for the hospitality industry,” said the report.

Markaz pointed out that skewed supply of hotel rooms towards upscale and luxury segment is a key trend in the hotel industry. “These hotels provide services including spa and gymnasium facilities for which the demand is on the rise. Also, some of the big international hotel chains are increasingly showing willingness to form tie-ups with local players and the latter are being recognized for their remarkable and novel services. Service apartments have grown in the GCC region with the rise of business travellers and expatriates who look for longer stays at reasonable prices.”

The report, however, cautioned that the possibility of a negative shift in the socio-economic and political instability of countries in the Middle East could impact the revenues of the region’s hospitality industry. Other issues like oversupply in countries like UAE, Qatar and some parts of Saudi Arabia affected the OR and ADR values in the region.

“The high employee turnover and the labour laws in the region are a cause of concern for the hoteliers. The rising cost of construction coupled with stringent lending policies is some of the other key challenges in the industry,” it said.

Both Dubai and Abu Dhabi hotels posted significant  growth in gross operating profit per available room (GOPPAR) this year, the latest HotStats survey reveals.

Tourist arrivals in the UAE are forecast to grow at a compound annual growth rate of 5.3 per cent between 2012 and 2022, with hotel supply also expected to increase from the current 96,992 hotel rooms in Dubai and Abu Dhabi, to a total of 125,383 hotel rooms in 2016.

The latest Ernst & Young Middle East Hotel Benchmark Survey shows that Dubai’s hospitality market witnessed positive growth on all key performance indicators through the first quarter 2013 compared to the same period last year. During 2012, approximately 3,500 new branded hotel rooms were added to Dubai’s hotel supply.

issacjohn@khaleejtimes.com

 

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